Asian rivals to look to common interests

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TESS VIGELAND: Chinese president Hu Jintao's got a lot on his plate: criticism over Tibet, the Olympics, inflation, so he's taking a break and heading to Japan. He leaves tomorrow for a five-day visit aimed at healing tensions between Asia's two biggest rivals. China and Japan have a complicated relationship. They're economic competitors and collaborators. During the visit they're expected to unveil a plan for managing their economic interests in the coming years.

From Shanghai, Marketplace's Scott Tong reports.

SCOTT TONG: Japan, China and you are more connected than you may think. Take your iPod. Japan's Toshiba makes the hard drive. Then, Chinese workers snap the parts together before they're sold. This Asian partnering helps Japan remain the world's number two economy, and China is hot on Germany's tail for third, but a big source of tension is China's pollution, now blowing over Japan. David Zweig is with the Hong Kong University for Science and Technology.

DAVID ZWEIG: Industrial growth in China has devastated lakes and forests in northern Japan in particular. This is a lot like the US and Canada, where manufacturing in the Ohio Valley has killed 50,000 lakes in Ontario and Quebec.

This week, he expects Japan to push China on emissions caps, and offer ideas on how to achieve them. Liu Jiangyong is with Beijing's Tsinghua University.

LIU JIANGYONG: China needs to upgrade its clean-energy technology in areas like wind and solar power. Japan is strong in those areas.

There's less give-and-take on traditional energy, namely undersea natural gas reserves that both sides claim, and there's friction over Chinese food exports, after a case of pesticide-tainted dumplings. Still, neither side can afford a trade spat, since Japan's top export market is China. Lots of bulldozers and cranes, says economist Glenn Maguire of Societe Generale.

GLENN MAGUIRE: It is Japanese heavy machinery. It's Japanese steel. The old sectors of the Japanese economy are enjoying a great deal of support from China at the moment.

He thinks a softer world economy will pinch Japan and China, but since they rely so much on each other, the pain from North America's credit crunch may wear off quickly.